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Raising the Curtain on S&P 500 Stocks

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S&P 500 stocks

In this series, we’ll be looking at five S&P 500 stocks with five years of EPS growth in the 20% range and dividend yields in the 3% range. Four of the five stocks are in the financial sector and the REIT industry.

As you can see in the chart below, all five stocks have beaten the broad-based indexes with their dividend yields. The S&P 500 (SPY) and the Dow Jones Industrial Average (DIA) have beaten three stocks each with their YTD (year-to-date) returns. The Nasdaq Composite (ONEQ) has beaten four stocks on the list. Only two stocks’ PE ratios came somewhat close to the S&P 500.

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Tax reforms and anticipated financial deregulations continue to drive the stocks. Rising interest rates and Treasury yields have rendered REIT stocks unattractive. The ten-year Treasury rates have been driven by improving economic fundamentals and inflation, which could explain the negative YTD stock returns of the residential REITs on our list. We’ll look at these five stocks in more detail in the rest of this series.

Dividend ETFs for these sectors

The WisdomTree MidCap Dividend ETF (DON) offers a 4% dividend yield at a PE ratio of 23.6x. It has 22%, 10%, and 8% exposure to consumer cyclical, utilities, and financials, respectively. The top five holdings include Targa Resources (TRGP), Macy’s (M), Kohls (KSS), Evergy (EVRG), and Tapestry (TPR).

The Invesco S&P 500 High Dividend Low Volatility ETF (SPHD) offers a 4% dividend yield at a PE ratio of 17.3x. It has 21% exposure to real estate and utilities and 5% exposure to financials. SPHD’s top five holdings are HCP (HCP), Iron Mountain (IRM), Welltower (WELL), FirstEnergy (FE), and Ventas (VTR).

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